Hyundai steels itself to fight Posco

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Hyundai steels itself to fight Posco

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The nation’s second-largest steelmaker Hyundai Steel said Wednesday it agreed to merge with its affiliate Hyundai Hysco to improve its competitiveness in the car steel production business.

If the merger is completed as planned on July 1, the company would have an improved car steel production system capable of competing with market-leading Posco.

The steelmaker’s asset size will be 31 trillion won ($28.4 billion), which is about 21 trillion won short of its competitor.

The combined operating profit for Hyundai Steel and Hysco is about 1.84 trillion won as of last year, about 1.4 trillion won short of the leading steelmaker.

“The decision was made to improve business efficiency for Hyundai Motor Group’s steel business and to create synergy with its affiliates,” Hyundai Steel said in a statement.

Hyundai steel has been preparing the merger for two years to expand its market share in production of steel for cars, in which Posco has had a commanding lead in both the domestic and global market.

In December 2013, Hyundai Steel took over Hysco’s cold-rolled sheets production business. Since the company already operates a hot-rolled sheets business, the merger will create an integrated steelworks.

Hyundai Steel will have more opportunities to expand businesses in the production of steel pipes and lighter steel plates for automobiles, in which Hysco has been successful.

Hysco is also expected to improve its profitability, as it now is able to utilize Hyundai Steel’s production lines for hot-rolled coils.

Hyundai Steel will also gain production lines abroad, as Hysco operates steel service centers (SCC) in 11 nations, including the United States, China and India.

Those SCCs supply the nation’s two auto giants - Hyundai Motor and Kia Motors - that also run production lines in the regions.

Previously, Hyundai Steel only had production lines in Qingdao, China.

Hyundai is expected to expand its sales network for car steel plates. About 67 percent of Hysco’s sales came from its SCCs last year, the company said.

BY KWON SANG-SOO [kwon.sangsoo@joongang.co.kr]

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